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Company A (accounting acquiree) |
Company B (accounting acquirer) |
||
Shareholders’ equity
|
|||
Retained earnings
|
$800 |
$1,400 |
|
Issued equity
|
|||
100 common shares
|
300 |
||
60 common shares
|
600 |
||
Total shareholders’ equity
|
$1,100 |
$2,000 |
Combined company |
|
Shareholders’ equity
|
|
Retained earnings 1
|
$1,400 |
Issued equity
|
|
250 common shares 2
|
2,200 |
Total shareholders’ equity
|
$3,600 |
Shares at par ($2) |
APIC |
Retained earnings |
Total shareholders’ equity |
|
1/1/X1
|
120 |
600 |
300 |
1,020 |
Shares issued 7/1/X1
|
40 |
110 |
150 |
|
Net income
|
250 |
250 |
||
12/31/X1
|
160 |
710 |
550 |
1,420 |
Shares issued 2/1/X2
|
40 |
190 |
230 |
|
Net income
|
200 |
200 |
||
3/31/X2
|
200 |
900 |
750 |
1,850 |
Shares at par ($1) 1 |
APIC |
Retained earnings |
Total shareholders’ equity |
|
1/1/X11
|
240 |
480 |
300 |
1,020 |
Shares issued 7/1/X11
|
80 |
70 |
150 |
|
Net income1
|
250 |
250 |
||
12/31/X1 1
|
320 |
550 |
550 |
1,420 |
Shares issued 2/1/X2 1
|
80 |
150 |
230 |
|
Net income1
|
200 |
200 |
||
3/31/X21
|
400 |
700 |
750 |
1,850 |
Recapitalization 4/1/X22
|
100 2 |
252 |
125 |
|
Net income
|
300 |
300 |
||
12/31/X2
|
500 |
725 |
1,050 |
2,275 |
Earnings for the year ended December 31, 20X1 |
$800 |
Number of common shares outstanding of Company B |
60 |
Exchange ratio |
2.5 |
Number of shares outstanding from January 1, 20X1 through September 30, 20X1 |
150 |
Number of shares outstanding from acquisition date through December 31, 20X1 |
250 |
Weighted-average number of shares outstanding (150 shares × 9 / 12) + (250 shares × 3 / 12) |
175 |
Earnings per share for year ended December 31, 20X1 ($800 / 175 shares) |
$4.57 |
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